Unemployment Drops as Job Market Shows Slow Growth

Unemployment rates fell this week, and analysts are predicting a further decline as more businesses reopen in the wake of Superstorm Sandy.

Weekly unemployment benefit applications fell by 23,000 to a seasonally adjusted 393,000 applications, according to the U.S. Department of Labor. The previous week saw 416,000 initial claims with a four-week average of 405,250 initial claims.

The decline this week follows a sharp spike in the wake of Sandy that pushed the unemployment applications to 451,000. The storm, which made landfall on October 29, cut off power to more than 8 million homes and businesses in 10 Mid-Atlantic states. Today, many of these businesses are beginning to reopen and resume normal operations.

Unemployment Falls in Half of Metro Areas

Of the 372 largest cities in the United States, unemployment rates dropped in 201 metro areas. The rates rose in 116 and did not change in 55 cities. The Labor Department also said that 180 cities have an unemployment rate below 7 percent – which is up from 107 cities the same time last year.

Of the largest cities in the United States, many in the West are continuing to see some of the highest unemployment rates. Yuma, Ariz., tops the list of those with the highest unemployment rate, with 29.8 percent. That is followed by eight California cities – El Centro, Yuba City, Merced, Visalia-Porterville, Modesto, Fresno, Hanford-Corcoran and Stockton – and Vineland-Millville-Bridgeton, N.J.,, with rates that range from 28.1 percent unemployment to 13.3 percent.

At the same time, some Midwestern cities have some of the lowest unemployment rates nationwide. Bismarck, N.D., boasts an unemployment rate of 2.2 percent. That is followed by Fargo and Grand Forks, both in North Dakota, with unemployment rates of 2.8 and 3.1, respectively. Other cities, including Lincoln, Neb.; Midland, Texas; and Iowa City, Iowa, follow, with equally low rates.

Unemployment Benefits Help to Stabilize Economy

Overall, state and federal unemployment insurance programs have cost about $520 billion in the past five years, according to the Congressional Budget Office. The jobless typically receive 26 weeks of state unemployment benefits and then shift to the federal jobless benefits, called Emergency Unemployment Compensation, for up to another 47 weeks.

Congress first enacted the federal benefits in 2008. These federal funds are scheduled to stop at the end of the year if lawmakers don’t make some changes. More than 2 million Americans would lose benefits at that point. The Congressional Budget Office said that preserving these unemployment benefits would help add 300,000 more jobs nationwide.

“The non-partisan Congressional Budget Office, independent economists, and policy think tanks have consistently found that unemployment insurance is one of our best economic stabilizers and generates tremendous bang for the buck relative to other economic policies,” Sen. Jack Reed, D-R.I., wrote in a letter to party leaders this week. “Given the potency and efficiency of unemployment insurance there should be no reason to let it lapse or expire.”

At the same time, the Federal Reserve is eyeing changes to interest rates but said it probably won’t happen until unemployment reaches 6.5 percent, which hasn’t happened since 2008.

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at bfay@debt.org.

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    Sources:

    1. Associated Press. (2012, November 29). Ahead of the Bell: US Unemployment Benefits. Retrieved from http://news.yahoo.com/ahead-bell-us-unemployment-benefits-101937852.html
    2. Associated Press. (2012, November 28). US cities with the highest and lowest unemployment. Retrieved from http://finance.yahoo.com/news/us-cities-highest-lowest-unemployment-201435906.html;_ylt=A2KJ3CVkardQBw4Ap1DQtDMD
    3. Delaney, A. (2012, November 28). Unemployment Benefits Extension Would Create 300,000 Jobs: CBO. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2012/11/28/unemployment-benefits-cbo_n_2207219.html
    4. Luhby, T. (2012, November 29). Unemployment benefits cost: $520 billion. CNNMoney. Retrieved from http://finance.yahoo.com/news/unemployment-benefits-cost-520-billion-103200662.html;_ylt=A2KJ3CSuardQ6AoAp0LQtDMD